This week I presented my ideas around Customer Driven Innovation in Commoditized Industries for an internal innovation summit of the Dutch/German energy company RWE/Essent Energy. Apart from the fact it was a very interesting event where Smart Customers, Grids and Cities were the talk of the town, it was good for me to think through parallels between energy service providers and financial service providers like Delta Lloyd Group (for whom I work; disclaimer: opinions expressed are my own here & I did not get paid or compensated in any way for presenting at the Essent event, nor naming them here on my blog).
In my talk I named four parallels that should raise the sense of urgency within both industries to start innovating. Here they are:
- Customers can think of a thousand better ways to spend their cash!
Let’s be frank. You need energy and you (mostly) must have an insurance policy, but because there is little choice involved, you probably wish you could do without.
- Customers do not notice the difference.
The other real big issue is that in both industries Customers do not see the difference between the products. And thus it’s price that seems to be the only differentiator.
- Governments are watching.
Both financial institutions and energy suppliers are considered critical to a countries economic (and social) infrastructure. Hence governments take a big interest in what we do, and how we operate. In Europe that tendency has been increasing over the past couple of years, with new legislation impacting both industries at an increasing pace.
- Customers can do it themselves (and they do so..)
More and more Customers start producing their own energy and even supplying some back to “the grid”. In insurances we see the same: small groups of people agree to put down a monthly premium and to pay out a certain amount if someone has a damage they’ve agreed to be insured. This is back to the basics of insurances.
Combine the four parallels and I think you’ll agree with me that their should be a high sense of urgency to innovate. I think the room agreed too, but that came as no surprise ;)
Three lenses for innovation
As I was told by the summit’s organization the innovation focus in the energy industry is mainly technology driven, I chose to provide them with three lenses for innovation that have little to do with technology, but have had great impact. These three are:
- Customer Jobs
I’ve written about this several times, so I won’t elaborate. I used the example of the Customer that doesn’t want a drill, but to hang a painting, and the example of how understanding Customer Jobs (using a laptop for internetbrowsing/access and e-mail mainly) resulted in a new growth market for home computing.
- Business Model
If you understand that Apple made their leaps in growth not through the invention of the Ipod, Iphone or Ipod, but through innovating the business models to fuel these devices, you understand the power of Business Model Innovation. And when you’re in a market where your Customers start producing energy (or insurances) for themselves, you know you need to find new ways (=business models) to earn money in the future.
- The Brand
A very good example of innovation around the brand is of course Zappos. Nothing sexy about selling shoes on-line, but if you make it your job to deliver happiness and do so by providing great Customer Service, you become one of the best known brands in the world, making good, very good money.
And with a little help from my good friend Erik Roscam Abbing from Zilver Innovation I put the three lenses in a model to show the audience that real value is to be found in combining the three types of innovation. It’s shown below. Let me know what you think!